The text defines an import tariff as, "taxes on
international trade". It just so happens that the US has put new tariffs
on China and China is appealing these to the World Trade Organization, as they view
these as unfair! This law took effect in March and it restored US authority to
levy certain kinds of import tariffs against Chinese goods. This authority was actually struck down earlier by Federal Court.
The World Trade Organization feels that these new tariff laws violate their
rules of transparency and proper procedure.
The US
court of appeals ruled in favor of this law and ordered the US Dept of Commerce
not to impose ant subsidy duties on goods from China. According to the article,
"The court found that
in a nonmarket economy, government payments to companies cannot be
characterized as subsidies." This article is actually very related to Pat's
posting about auto parts so please take a look at that one as well. What do you
guys think about this topic related to what we are learning in class? We know
that Tariffs can be put in place to protect the employment of labor in the home
country as foreign can threaten domestic industries. Is this the case here or
is this just a game of politics?
Back, A. (2012, September 17). China goes to wto over u.s. tariff law. Retrieved from http://online.wsj.com/article/SB10000872396390444450004578001864184711 522.html?KEYWORDS=tariff
I think that this is an interesting topic in a political sense because clearly Congress, and especially Obama, want to safeguard American workers from outside competition somewhat. In the short run, safeguarding through tariffs may benefit the U.S. while hurting China. However, in the long run, the U.S. is limiting itself in terms of choices of products to consume and services to use. In relation to the specific-factors model we've gone over in class, it is evident that some prices will rise as a result of tariffs against China (prices of Chinese imports in this case). These price increases, should American consumers still continue to purchase Chinese imports at a higher rate relative to the amount of the tariff increase, would actually benefit Chinese workers while causing a decline in real wages in the U.S.. While this situation is not likely in the short run because American consumers would rationally purchase domestic goods, it is still possible. Thus, I think politicians have to be careful when they put tariffs on other countries or try to gain authority to do so, especially with the potential for opposition from the courts and the WTO, because in the long run, tariffs could close off choices and opportunities for capital owners to increase the productivity of their capital in the future so that overall productivity and overall welfare would improve. Actually, though, I think that in the short run, the GPX law was a good idea because the Chinese had manipulated their currency. Thus, prices for Chinese goods and currency exchange rates were not truly reflective of market behavior, so it makes sense that China needed some consequence. However, I think tariffs should only be temporary, because in the long run, tariffs that are over-stretched could have a hugely negative effect on the U.S. economy, especially since we already trade with China so much currently. Overall, I think that the GPX law was a genuine attempt to protect the employment of labor in the U.S. from foreign competition and the corresponding skewed valuation of prices and currencies, and not really a game of politics. In essence, though, I think tariffs should be corrective, not punitive.
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